Reaping the AfCFTA Potential Through Well-Functioning Rules of Origin

Abstract

Conceptually, a Ghanaian cocoa butter manufacturer exporting to chocolate producers in South Africa under AfCFTA preferences faces RoO compliance costs.These costs are inherent to production, for example emanating from technical requirements including sourcing inputs such as cocoa beans and labor in the FTA, and administrative procedures from ascertaining compliance to the rules (Angeli et al., 2020;Estevadeordal and Suominen, 2003).Alternatively, if the Ghanaian manufacturer opts to trade under the Most-Favored-Nation (MFN) clause, there will be no obligation to prove the origin.Ceteris paribus, if the costs associated with AfCFTA RoOs are higher than the MFN tariff, then the manufacturer will export to South Africa under MFN.In the same vein, if South Africa-based chocolate producers encounter excessive RoO-related costs from sourcing cocoa powder from the AfCFTA, they might import their inputs from outside the area.Similarly, wheat grown and harvested in Morocco can be processed locally into flour and shipped to a Kenyan baker under AfCFTA